Decision relative to the petition of Webster Financial Corporation, Waterbury, Connecticut to acquire FirstFed America Bancorp, Inc., Swansea, Massachusetts
By the Division of Banks
Webster Financial Corporation (the "Petitioner" or "Webster Financial"), Waterbury, Connecticut, has petitioned the Board of Bank Incorporation ("the Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4 to acquire FIRSTFED AMERICA BANCORP, INC. ("Bancorp"), Swansea, Massachusetts, and its subsidiary bank, First Federal Savings Bank of America ("First Federal"), Fall River, Massachusetts. Petitioner's application before the Board is part of a multi-step transaction which will result in First Federal being merged with and into Petitioner's subsidiary Bank, Webster Bank, National Association ("Webster Bank"), Waterbury, Connecticut. Webster Bank, formerly a federal savings bank, completed its conversion to a national bank charter on April 21, 2004. As a result of this transaction, First Federal will cease to exist, and its banking offices will become the branch offices of Webster Bank.
As directed by the Board, notice of the application was published and posted and a public hearing was held, thereby affording an opportunity for interested parties to attend or submit comments. Other standard procedures informing the public of this matter before the Board were implemented. The public hearing was held on April 27, 2004. Representatives of Webster Financial and First Federal offered testimony and responded to questions from the members of the Board. Following the hearing, the public comment period remained open so that interested parties could submit any additional comments. No further public comments were received, and the comment period closed on May 3, 2004.
Webster Financial is a bank holding company headquartered in Waterbury, Connecticut. As of December 31, 2003, it had total consolidated assets of approximately $14 billion. In addition to Webster Bank, Webster Financial is the holding company for a number of trust subsidiaries and an insurance agency, Webster Insurance, Inc. Webster Bank is Connecticut's largest bank, with approximately 118 branch offices located throughout Connecticut and one in New York. It offers a range of commercial and consumer banking services and products, and its deposits are insured to applicable limits by the Federal Deposit Insurance Corporation ("FDIC"). Webster Bank holds several non-bank subsidiaries, which provide equipment financing, asset-based lending, insurance brokerage, trust, and investment advisory services. One of these subsidiaries is Webster Trust Company, National Association ("Webster Trust"), a non-depository trust company that operates under a national bank charter. In a related transaction that is subject to the jurisdiction of the Office of the Comptroller of the Currency and the FDIC, Webster Trust may be merged with and into Webster Bank.
Bancorp is a unitary thrift holding company. As of December 31, 2003, Bancorp had approximately $2.5 billion in total consolidated assets. In addition to First Federal, Bancorp has a wholly-owned insurance agency subsidiary and a 65% interest in FirstFed Trust Company, National Association ("First Trust"), Swansea, Massachusetts. Like Webster Trust, First Trust provides investment advisory and fiduciary services, but operates under a national bank charter. First Trust may be acquired by its two other shareholders. First Federal maintains a main office in Fall River and 19 full-service branches and ATMs throughout southeastern Massachusetts and Rhode Island. Its deposits are insured, to the extent allowed, by the FDIC. First Federal has three wholly-owned subsidiaries; two investment companies and a mortgage company.
As an interstate transaction and pursuant to requirements of chapter 167A, the reciprocity laws of Petitioner's home state are subject to the review of the Commissioner of Banks. Specifically, the Commissioner must determine whether the proposed transaction is authorized under the laws of Connecticut for a Massachusetts-based holding company, under conditions no more restrictive than those imposed by Massachusetts. Based on a review of the applicable law, and consistent with previous rulings regarding the Petitioner and Connecticut's reciprocity laws, the Commissioner has concluded that the proposed transaction is permissible under the Commonwealth's Interstate Bank Act.
Prior to approving an application under chapter 167A, the Board must have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and MHPF's various affordable housing loan programs. The Board has recently received notice from the MHPF that arrangements satisfactory to it had been made for this transaction.
The Board's review of this transaction focuses on the applicable statutory and administrative criteria which include, among other things, whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. In determining whether the public convenience and advantage are promoted by the proposed transaction, the Board considers, among other things, whether there has been a showing of "net new benefits." Net new benefits are defined as initial capital investments, job creation plans, consumer and business services, commitment to maintain and open branch offices within a bank's delineated local community, and such other matters as the Board may deem necessary or advisable. The Board also considers the record of performance of the banks involved in this transaction under the Community Reinvestment Act ("CRA") and any relevant public testimony or commentary submitted into the record.
On the issue of whether banking competition will be unreasonably affected by the proposed transaction, the Board considers, but does not rely exclusively on, the guidelines used by federal authorities to review bank mergers. Essentially, these guidelines define relevant markets and measure concentration, which is considered an important indicator of competitiveness. The starting point in the federal analysis is the Herfindahl-Hirschman Index ("HHI"), an arithmetic measure of market concentration that synthesizes the distribution of market shares and the number of banks in an affected market into a single value. In addition to that analysis, the Board considers the competitive impact of the proposed transaction on a community-by-community basis, as well as on the overall banking structure of the Commonwealth. In this case, Webster Bank has no branch offices in Massachusetts, nor do Webster Bank and First Federal compete in any of the same banking markets. Thus, the proposed transaction will have little direct impact on banking competition in the Massachusetts. Furthermore, the Board is satisfied that consumers in the affected banking markets will continue to have access to competitive products and services offered by a diverse number of commercial banks, savings banks, cooperative banks, credit unions and non-bank providers. Accordingly, the Board finds that banking competition will not be unreasonably affected by the proposed transaction.
The Petitioner submitted a variety of materials relating to the public convenience and advantage that will result from the proposed transaction. It states that since there is no overlap it has no plans to close any of First Federal's banking offices. In addition, it points out that First Federal customers will have access to the Webster Bank's extensive branch and ATM network. The Petitioner maintains that First Federal customers will be further advantaged by the expanded array of consumer deposit and lending products and services offered by Webster Bank. These products and services are detailed in the submitted application. It also asserts that First Federal customers will benefit from the products and services offered by Webster Bank's non-bank subsidiaries. Small and mid-sized business customers, the Petitioner believes, will benefit from additional commercial deposit products and the increased availability of credit. Among other offerings, the Petitioner notes several commercial loan products not available through First Federal, including insurance premium financing, equipment and vehicle lease financing, and asset based lending.
At the hearing, representatives of First Federal and Webster Bank presented the Board with additional arguments in favor of the transaction. In response to questions from the Board, the Petitioner indicated that any job losses resulting from the transaction were expected to be minimal, and limited to administrative staff. The Petitioner advised the Board of its policies with regard to displaced employees, as well as its efforts to absorb such employees into the Webster Bank organization. Petitioner also commented on its job creation plans as the combined entity grows in the future.
As the record demonstrates that the customers of First Federal will have access to a significantly expanded service area and an expanded array of traditional and non-traditional banking products and services, the Board's review weighs in favor of the finding that the public convenience and advantage will be promoted. The Board further concludes that the criteria for net new benefits has been established.
The Board's review of this transaction includes an assessment of the subsidiary banks' performance under the CRA. Such assessment for a state-chartered bank includes examination by Division of Bank personnel, as well as an analysis of the legitimate concerns raised by the community and the bank's response to those concerns. For other institutions, the Board reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency. Here, the relevant evaluations were submitted as part of Petitioner's application materials. In the December 4, 2000 CRA examination of First Federal, performed by the Office of Thrift Supervision ("OTS"), it received a "Satisfactory" rating. In the January 14, 2002 examination of Webster Bank, also performed by the OTS, it received an "Outstanding" rating. Webster Bank points out that it has been rated as "Outstanding" in six consecutive exams. Based on its review of these ratings, the Board concludes that the banks involved in this transaction are adequately meeting the credit needs of their respective communities.
Finally, the Board reviews the financial structure, tax consequences, and operational aspects of the transaction. It has reviewed the consolidated financial statements of the parties and the details of the proposed transaction, and is satisfied with the Petitioner's capital ratios and projections. Information regarding the tax consequences of the proposed transaction was also provided by Petitioner and considered by the Board. The reasons for Webster Bank's conversion from a federal savings bank to a national bank were also discussed at the public hearing. Additionally, the Board is satisfied with the Petitioner's efforts to ensure a smooth transition of its systems and account information.
Conclusion
Based on the record of this matter and considered in light of all relevant statutory and administrative requirements, the Board concludes that competition among banking institutions in the Commonwealth will not be unreasonably affected and that the transaction will promote the public convenience and advantage. The Board also finds that the banks involved in this transaction have a satisfactory record of performance under CRA. In accordance with these findings and pursuant to the statutory authority cited herein, the Board approves the application and authorizes Webster Financial Corporation to acquire 100% of FirstFed America Bancorp, Inc.
The approval granted herein is subject to the condition that all related transactions are completed within one year of the date of this Decision.
| Steven L. Antonakes ___________________________ Commissioner of Banks | |
| Alan L. LeBovidge ___________________________ Commissioner of Revenue | Board |
| Timothy P. Cahill ___________________________ Treasurer and Receiver General | |
| May 12, 2004 _____________________ Date |